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eBook Math and the 500 Pound Gorilla

I’ve uncovered a whole host of eBook distribution services – Lulu, Vook, BookTango, Pressbooks, and Ebookit. I’d advise checking out all of them if you have an interest in eBook distributors. I’m going to stick with last week’s choices, Smashwords and BookBaby because they’re my top two.

I’ve also been poking around data that includes a market-hungry gorilla that may make them all seem moot, but we’ll get to that in a bit.

Of the two, Smashwords is the simplest. The stripped down, no-frills appearance of the site effectively communicates the experience you will receive. They offer some excellent free advice and from my understanding, founder Mark Coker is incredibly responsive to the Smashwords community.

True to this spartan image, Smashwords offers a very straightforward plan. Free to participate, they submit to their retailers, take a cut and that’s it. The only caveat is that if you want to be consider for major retailers, you have to be accepted into their “Premium Catalog”. This is also free, and every book you submit is considered. As long as you adhere to their style guidelines, then acceptance is generally granted.

BookBaby on the other hand offers a variety of subscription plans. The first is free and operates a bit like Smashwords, taking a cut of the sales. The second costs $99 and adds a few features that revolve around formatting your work into an eBook – they will provide graphics conversions, copies of your book in ebook formats so you can make direct sales, etc. The third costs $249 and removes the royalty so that you retain 100% of the net sales (the retailers of course still get their cut). This level also offers a copy in PDF for direct sales, book metadata review and a coupon off cover design.

I’ll get into the figures in a minute, but I think it is worth backtracking and checking out a list of which retailers each service partners with:

I’ve highlighted a very important piece of information. Smashwords does not at this time fully distribute to Amazon. Amazon is the 500 pound gorilla of this world. As far as I can tell, eBook sales at Nook are tanking. Sony has stopped selling eBooks completely. Apple, however, may be one to watch. But Amazon is clearly dominating this space.

However, for any of these eBook distributors, it is often recommended that even if the service uploads to Amazon that you do that upload yourself. Why? Because Amazon is SO big, the majority of your sales will come through them. Taking a middle man’s cut on that isn’t the brightest idea. They are such a big player every self-pub author needs to be very familiar with their pricing, process and promotional offers. A middle man can sometimes get in the way of these things.

Now, on to pricing. This is where we have to look at math.

Smashwords offers the following: 85% for sales at their own Smashwords retail store. For most other retail distribution partners, Smashwords pays the author/publisher 60% of the suggested list price you set for your book. There are a few exceptions, especially if foreign currency is involved.

BookBaby takes 15%, or leaves you with 85% of the net for all sales (meaning after the retailer takes their cut – see chart below.)

There are also hidden charges to consider. ISBNs are given for free at Smashwords (unless you have your own) but are charged a $15 fee at BookBaby. If you will be making frequent changes to your book, Smashwords is the way to go because BookBaby charges for content, pricing and metadata changes.

So, if you have a book on, let’s say, Nook and you list the book from 2.99 to 9.99, you will receive a 65% royalty from all sales. Let’s pick a price of $2.99. If you upload it yourself, you get $1.94. If you used BookBaby, that sale earns you $1.64. Smashwords, you earn $1.80.

This is all about the math. 85% of net is not the same as 60% of list price. What that means is that with Smashwords, you earn .16 more per sale. While this may not sound like much, lets look at the following for a book priced at 2.99:

By the time you hit 500 in sales, you are looking at a significant gap.

Okay. Now that I’m done with the math, I want to point out the other column I added – the “self” column. On those 500 books, I would have made an extra $70 had I left out the middle man entirely. 1000 books and you are looking at $140. You get the picture. Now, you have to extrapolate that toward your own goals.

However, back to that gorilla. Many self-pub gurus are doing things like reporting their sales (or were, that seems to have slowed down in the past couple of years) and at last count many were saying that 80 to 90% of their sales were on Amazon. If conventional wisdom says that Amazon is where you manually distribute anyway, then how much effect can these commissions on say 10% or 20% or your sales have? If I sell 5000 books and receive full royalties on 4000 of these sold at Amazon and then pay a middle man to extend my reach to another 1000, is it worth it? I think so.

But it’s a tricky call. By some more current estimates, Amazon Kindle is now closer to 70% of the eBook market with Apple making impressive gains (even as Nook is fading).

I think the market is volatile enough and broad enough to not go with a program like KDP Select where you would be exclusively locked in with Amazon. Therefore these distributors do serve a purpose despite the gorilla’s massive reach. For example, keep your eye on iPad book sales over the coming months. I personally think it is a market I want to at least have some exposure in at the start.

My plan, as of this moment, is to go with Smashwords and do my own distribution to Amazon through KDP. I don’t think investing a lot of time in learning other eBook retailers upload / publishing systems is worth the hassle. However, this decision needs to be under constant review as everyday the market is changing.

One word of warning though – once you go with one of these distributors, it can become tricky to go solo with their partners if you change your mind. In many cases, this requires setting up a new account with that partner and re-uploading which may force you to lose ranking data or reviews for that book. At the moment, with a 500 pound gorilla on the loose, I think it is risk I can afford to take as I don’t see Amazon being overthrown in the immediate future.

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